The chairman of the Senate Economic Legislation Committee has asserted that substantial upheaval could occur in the default funds space over coming months as a result of the Fair Work Commission’s approach to the default funds under modern awards regime.
At the same time, a senior Treasury official has acknowledged that those super funds not likely to make the cut in the FWC’s selection process may be best-advised writing to all members of their employer default superannuation funds suggesting they make a choice to retain their current default fund arrangements.
Responding to a question from the chairman of the Senate Economics Legislation Committee suggesting that while the BT Group had 25,000 employer plans, it had not been named in a single award, Treasury’s general manager, Financial System Division, Meghan Quinn suggested companies like BT Group could write to members asking them to make a choice to remain within their existing arrangements.
The committee chairman, Senator David Bushby, suggested to Quinn that decisions likely to be made by the Fair Work Commission “could see hundreds of thousands of current superannuation plans lose their default status in the short term”.
“So there could be major upheaval in the default super space in the coming months as a result of decisions that are currently being made, which would seem to me to conflict with the aims of the (Government’s) superannuation discussion paper, particularly in terms of increasing competition,” he said.
“There are potentially around 150,000 superannuation plans, with approximately one million employees servicing those plans. There is potential for significant upheaval in the industry in the event that the providers of those plans are frozen out,” Senator Bushby said.
Quinn pointed out that people would only be defaulted across to default funds under the Fair Work Commission process if they had not made a choice themselves.
“But there is also an option for the funds to contact their members and indicate that they could make a choice and stay in their existing plan by enacting a choice,” she said. “So there are mitigating mechanisms that the industry can employ.”
